April 29, 2021
Did you know that an accountant’s exposure for lodging incorrect or misleading MFRs may result in them being sued by the liquidator of a construction/builder client for all of the liabilities and costs incurred by the client?
Clients who conduct business in the building and construction industry know that (because the thresholds are so low – see link 1) they are required to hold a Queensland Building and Construction Commission (QBCC) licence.
In accordance with the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act), QBCC licensees must satisfy the financial circumstances outlined by the QBCC’s financial policies.
One such policy is referred to as the Minimum Financial Requirements (MFR). The MFR of a licensee is provided by lodging an MFR report, which is to be completed by an ‘Accepted Independent Accountant’.
A recent case of Milton, an accountant, in the Supreme Court of Queensland, is a timely reminder for accountants of the risks and obligations associated with being an Accepted Independent Accountant.
OBLIGATIONS AND RISKS OUTSIDE OF THE QBCC
Accountants should be aware that being suspended as an Accepted Independent Accountant is not the only consequence for failing to satisfy the QBCC requirements when preparing a licensee’s MFR report.
For example, should the accountant fail to satisfy the QBCC requirements when preparing and lodging the MFR report, the potential claims against them could include:
- damages for negligence;
- damages for breach of contract (the retainer or client agreement with the client);
- damages for misleading and deceptive conduct under the Australian Consumer Law and its various manifestations in each state and territory and with the Commonwealth; and
- consequences with the QBCC under the QBCC Act.
WHAT CAN GO WRONG?
In respect of problems created by non-complying or misleading or incorrect MFRs, who can cause problems for the accountant? The abovementioned Milton case provides examples of these problems:
- notwithstanding the avenues of dispute, the QBCC can issue an exclusion notice, which means that the accountant is suspended from preparing MFR reports for a period of years.
- should the construction/builder client have their QBCC licence cancelled or suspended, the client may sue the accountant.
- the accountant may be sued by a creditor or liquidator if the construction/builder client goes into administration or a liquidator is appointed.
STEPS TO HELP MITIGATE RISK
Here are some steps accountants should take to help mitigate their risks when being an Accepted Independent Accountant:
- have a clearly set out scope for the retainer or client agreement with the client, including limitations of the scope of what you are prepared to do for the client;
- review and consider the scope of the professional indemnity policy for the accountant or the accounting firm to understand coverage for the type of work associated with construction and builder clients;
- read and understand the MFRs (as issued pursuant to the Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018 (Qld) (QBCC Regulations));
- make the client aware of the MFRs and advise of the consequences of their non-compliance (i.e. including suspension or cancellation of QBCC licence);
- follow up with their clients to ensure that quality internal management of accounts are consistently and accurately prepared;
- if contacted by the QBCC due to the MFR report(s) not complying with the QBCC Act and/or QBCC Regulations, begin the review process as soon as possible and rectify the issue to mitigate the risk of:
- the client having the QBCC licence suspended or cancelled; and
- being excluded as an Accepted Independent Accountant for 3 years.
HOW WE HELP
If you have QBCC licensed clients, McInnes Wilson Lawyers can assist you by:
- providing advice on insurance policies that apply in the accounting industry;
- assist accountant’s construction and building clients to help them understand and comply with MFRs, the QBCC Act and QBCC Regulations, and investigations conducted by the QBCC; and
- assist accountants by setting out the scope of work that your firm is prepared to do for construction and builder clients.
1JM Kelly Builders Pty Ltd (in liq) v Milton  QSC 59.